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Breaking Down Blockchain: Part 1

As the buzz around blockchain intensifies, retailers must be ready to adapt or risk being left behind

Blockchain: It’s a word that may seem intimidating and mysterious to some, but also one that retailers will not be able to ignore for much longer. When most people think about blockchain, they often readily associate it with the equally enigmatic topic of bitcoin. But far from its puzzling perception, blockchain is poised to provide retailers with endless opportunities to save time, money and countless headaches in the very near future. While most blockchain technology is still in the early stages of testing and development, industry experts predict it will completely change the way retailers operate their stores and supply chains in as little as two years. 

Benefits such as monitoring the supply chain for food safety and other critical hot spots, providing additional transparency to customers and gaining a better control of confidential information indicate that blockchain is about to blow up, and retailers would be wise to get up to speed and prepare to jump aboard. To cover every aspect of this broad and robust technology, Winsight Grocery Business has created a two-part series to give retailers the full scoop on blockchain. 

“Blockchain is going to hit retail very, very quickly,” says Martin Dudley, CMO of Nucleus Vision. “Everyone’s working around the fringes of it, but when it hits them, people are going to be surprised” by how fast it seemed to have taken hold. Grocery stores in particular, he says, are going to have to be the leaders in their ecosystem and push their supply partners to adapt to the technology for it to be successful. 

Karen Caplan, president and CEO of Frieda’s Specialty Produce, wrote a recent “Blockchain and Bitcoin for Dummies” blog post after realizing it was something that needed to be broken down. She offers an approachable way for operators to think about blockchain. 

“It’s so scary—they use these big technical terms and then you talk to scientists and programmers and they make it sound like rocket science,” Caplan says. “I sell produce for a living, so I had to make it simple for my readers.” She says blockchain “is just a secure way to share pieces of information without creating a whole lot of work. Ideally, it’s like having a giant Excel spreadsheet, but you’ve locked the cells and nobody else can unlock them, and you can share specific columns with whoever you choose.”

Peter Fedchenkov, founder of INS Ecosystem, describes blockchain technology as “a way of storing and sharing information across a network of users, as a single immutable ledger. It creates transparency because anyone with access to a blockchain can potentially view all of the information” in a specific block, he says. “In food, for example, a retailer would know with whom his supplier has had dealings. Additionally, since transactions are not stored in any single location, it is almost impossible to hack the information.”

Fedchenkov cites early adopter Walmart as an example of a retailer that uses blockchain effectively. The world’s largest retailer just completed two blockchain pilot projects, including one for mangoes in one of its stores, which, prior to blockchain, took six days, 18 hours and 26 minutes to be traced back to the original farm. Once blockchain technology was applied, Walmart was able to provide all of the traceback information in 2.2 seconds.

Michael Halula, retail practice director for the Americas for Teradata, says grocers have always been a bit skittish about leading technology frontiers because they have such tight profit margins, causing them to be more cautious about investing in new technologies. But there’s an interesting dynamic at play with Amazon’s full-on infiltration into grocery—and its abundance of funds to further fuel its channel penetration into the age of technology. 

“Now, Amazon, which has the financial capabilities to innovate in the grocery space, is pushing new thinking within the grocery world,” Halula says. “When you look at traditional retailers who haven’t really been pushed to innovate very much, retailers like Walmart and Amazon/Whole Foods are going to push the envelope.” He further envisions what the future might look like if an Alibaba/Kroger alliance comes to pass. Alibaba, says Halula, would absolutely “push Kroger to do things a little differently and give them the funding to innovate a little bit more.” 

Once mainstream food retailers get past the initial head-scratching about what blockchain is and how it can be used, they’ll have plenty of opportunities to get in on the ground floor. With Walmart already aboard and tech-savvy companies such as Amazon blazing new paths in the grocery space, there’s no doubt that blockchain is fast approaching. 

Cutting Out the Middleman 

Time is money, and one of the most important applications of blockchain is dramatic conservation of time for retailers in the form of cutting out the middleman. 

In the present-day system, says Mohamoud Egal, blockchain technical lead for IBM’s retail, travel and CPG divisions, each step in the supply chain requires a middleman to write down the transaction in their so-called book, causing more friction with each step.  “It’s like a bad email chain, where you have to email Sally to email John to email Rebekah to fill out a form, which is going to set off another email to go to Mark, who submits a request to get back to you,” he says. “That friction alone—the extra time and extra work that’s required of each transaction—is unnecessary. Multiply that by the number of transactions you have to do in a given period, and that’s a lot of savings right there.”

Tightening up the supply chain can also help cut down on food waste, Egal says, which is not only a societal problem, but also a huge financial drain for retailers.

Connecting With the Connected Consumer

Today’s consumers are all about transparency, and what better way to win over their hearts than by allowing them to track the products they purchase all the way through the supply chain? Allowing consumers to track items “from seed to shelf” or from “birth to butcher,” as Dan Ring, VP of public relations at ACI Worldwide, puts it, can be a huge selling point for retailers that insert themselves into the blockchain game. “I think the consumer market is moving more toward that health-conscious mentality and really wanting to know where their food is coming from,” he says. “Blockchain has a great applicability there, because you can actually track things all the way through and be able to share that information with the consumer.”

This type of thinking will also dramatically alter how retailers view their supply chains and how they make it visible to their customers. As an example, Halula says blockchain could be a game-changer for imparting transparency for a dedicated organic shopper who is “really sensitive about knowing the farm that it came from, or where it was pro-duced.” In the past, he says, “The supply chain seemed to be separated from the customer experience. But as we move forward, the customer experience is critical to com-plete the last mile of delivery,” whether an item is picked up in-store or delivered to a home. 

See part 2 of this series here.

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